By Louis van Boxel-Woolf and Chiara Holzhaeuser
(Reuters) – German automotive and industrial supplier Continental cut its annual sales guidance for the second time this year on Monday (NASDAQ:), citing weak industrial demand in Europe and North America, but it beat third quarter profit expectations.
Continental’s shares were up 5.6% at 0857 GMT after third quarter core profit, at 873 million euros ($932.98 million), beat consensus by about 11%.
The group’s margin of 8.9% for the quarter also surpassed expectations of 7.9%.
It said profit rose in response to price discipline and cost cutting in its automotive division, which it wants to spin off by the end of 2025.
Analyst Pal Skirta of Metzler said the result at the automotive division likely boosted confidence in Continental’s spin-off plans, driving the firm’s shares up.
Continental expects sales for 2024 to be between 39.5 billion and 42 billion euros, below its 40-to-42.5 billion euros guidance in August, but in line with sales expectations for the year in a company-compiled consensus.
It confirmed sales and earnings guidance for the automotive division, which last year accounted for almost half of sales.
Continental had already cut its sales guidance in August, citing weaker demand for passenger cars in Europe and for tyre replacements in North America.
The latest cut was a result of downward revisions in the ContiTech business, which supplies industry as well as carmakers.
European carmakers face hurdles including high costs and Chinese competition, in turn hitting their suppliers.
Carmakers BMW (ETR:), Mercdes-Benz, and Stellantis (NYSE:) have all issued profit warnings this year, and Volkswagen (ETR:) plans wage cuts and plant closures.
Automotive supplier Schaeffler announced job cuts last week, days after the chairman of Robert Bosch (NS:), the world’s largest auto parts supplier, said further layoffs might be needed at his firm.
Continental announced job cuts in its automotive division in February.
($1 = 0.9357 euros)
